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Planning for Children's Future

I am investing every month through a SIP in Franklin India Bluechip and HDFC Equity in both my kids' name and intend to do this for next 15 years. This investment is for their education, marriage, etc. Am I on the right track?

I am 31-year-old and self-employed. I have two young children. I am investing every month through a Systematic Investment Plan (SIP) in Franklin India Bluechip Fund (growth option) and HDFC Equity Fund (growth option) in both the kids' name since April 2003. I intend to continue doing this for the next 15 years or so. This investment is being done for their education, marriage, etc. Am I on the right track?
Dilip Gala

We are pleased to see you harnessing the power of equity for long-term capital gains. Over the long-term, equities give the highest return of all asset classes. Since you are investing for your kids, you too have a very long investment horizon. And that's just the way it should be—investing horizon matching that of the asset class.

The fund selection is also good. Both Franklin India Bluechip and HDFC Equity have a strong long-term performance track record. For instance, in the past ten years, while Franklin India Bluechip has given an annualised return of 28 per cent, HDFC Equity has given a total return of 20 per cent in the last nine years.

And since you are planning to invest regularly in both these schemes through SIP, you will also be able to benefit from the rupee cost averaging. Your investments will be spread across time and not tied to any particular level of the market. Even if each investment is small, over time the power of compounding can transform this into a significant amount.

Though equities are good for long-term investments, we would advise you to maintain a marginal allocation to debt ranging from 10 to 20 per cent. Once you have fixed the asset allocation, rebalance at regular intervals of say one year. This will enable you to lock in profits and will also add stability to the portfolio. So, do consider investment in two or three debt funds or any debt instruments.

We wish you all the best.

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